Transcript From employers - UNUM Forms Management System

Presenter’s name | Month 2011
MK-2589 (5-11)
Unum and health care reform

No direct impact on
Unum benefits

Opportunities to develop
benefits to help fill gaps
in coverage
2
Patient Protection & Affordable Care Act (PPACA):
A high level overview
 Increases
the need for Unum coverage:
Disability
Critical
illness
Accident
 The
CLASS Act spotlights
the need for private long
term care insurance
Group
LTC
3
Health care reform: what is it?
At its most basic, the new legislation:
Requires
most
Americans to
have health
insurance
Mandates
reform of
medical
insurance
practices
Subsidizes
coverage for
low/middleincome
enrollees
Makes it
easier to
buy/retain
coverage
Adds employer
responsibilities
− must “pay
or play”
Federal
voluntary
LTC
program CLASS Act
4
The impact on our health care coverage
Mandate
Effective
Preventive care covered 100%
2011
No pre-existing conditions exclusions*
2011
Coverage can’t be rescinded
2011
Children covered to age 26
2011
No maximums for “essential benefits”
2011
Health Insurance Exchanges
2014
*For children through 18 years old
5
The impact on employers
Mandate
Effective
Employers offer coverage or pay a penalty
2014
Restrictions on cost-sharing with employees
2014
90-day limitation on waiting periods
2014
Auto-enrollment for large businesses
2014
6
The impact on our industry
Limited direct impact No required changes to Unum benefits
New windows of opportunity
Opportunities:
†Health
Unum
benefits
become
“must haves”
Expected
growth in
Unum’s
supplemental
health plans
Unum benefits
complement
high deductible
CDHPs†
Continued
investment
to fill gaps
in coverage
reform is driving a move to consumer-directed health plans (CDHPs).
7
Who will pay for reform?
$940 billion funded primarily through tax levies on:
Medical
insurers
Pharmaceutical
companies
Affluent
Americans
Medical device
manufacturers
8
Recent and future changes
What we
have seen:



W-2 requirement
delayed
Automatic enrollment
delayed
Interim final regulations
Possible areas for
future change:

1099 reporting requirements

CLASS Act

Medical device levy

40% “Cadillac” excise tax
● Grandfathering - pending
● Discrimination testing
- pending
● Coverage to age 26
● Loss ratio rebates
9
Broader challenges

Repeal unlikely

Two ongoing court challenges: Florida and Virginia
● Individual mandate
● Tax or fee

Likely to be resolved by the Supreme Court
Date
U.S. District Court
Ruling
Oct. 2010
Eastern District of Michigan (Detroit)
Constitutional
Nov. 2010
Western District of Virginia (Lynchburg)
Constitutional
Dec. 2010
Eastern District of Virginia (Richmond)
Unconstitutional –
individual mandate only
Jan. 2011
Northern District of Florida*
(Pensacola)
Unconstitutional
Feb. 2011
District of Columbia
Constitutional
*A number of other states have signed on in support.
10
Key market reforms
The reformation of the
medical insurance market

Significantly changes the
purchase and delivery
of heath insurance

Impacts both employers
and employees
12
The impact on our nation
Mandate
Effective
Limits on annual/lifetime benefits caps
for “essential benefits”
2011
Elimination of pre-existing condition
exclusions
2011
No rescissions of coverage, except in
the cases of fraud
2011
Changes to FSA regulations
2011, 2013
13
The impact on employers
Mandate
Effective
Must provide help for nursing mothers
in workplace
2010
Mandate to enroll children<age 26 in
health plan
2011
Some “grandfathering” for existing plans
• Special terms for self-insured plans and
2011
Limits on deductibles and cost-sharing
with employees
2014
plans contracted through collective
bargaining agreements
14
The impact on benefits industry
Mandate
No direct impact on Unum benefits
Effective
2010+
Medical insurers required to maintain medical
loss ratios of:
 80% for small group or individual plans
 85% for large group plans
2011
Coverage for “essential benefits”
in these categories:*
 Preventive care (100%)
 Hospitalization
 Maternity and newborn care
 Mental health and substance abuse coverage
 Prescription drug coverage
2011
Health Insurance Exchanges created
2014
*Specific list of essential benefits is to be determined by Dept. of Health and Human Services.
15
Grandfathered plans
Plans in effect as of March 23, 2010 will be considered
to be “grandfathered” for the purposes of compliance
with the market reforms.
Employers can
Restrictions

No elimination of
benefits

Limited changes in
copays/deductibles

No changes on
coinsurance

Limited changes to
cost sharing

Make changes to
comply with federal
or state law or with
PPACA

Allow employees to
add new family
members

Add new employees

Change carriers
NEW
16
Business as usual for benefits other than medical
The anticipated impact on other employee benefits—
including disability, accident and critical illness—is minimal.

For the purposes of health care reform, certain kinds of
coverage are designated as “excepted benefits” and are not
subject to the Patient Protection and Affordable Care Act.

The Department of Labor
defines these as benefits
provided under a separate
policy, certificate, or contract
of insurance, such as voluntary
coverage that is supplemental
to a group health plan.
These include:

Accident

Critical illness

Disability

Long term care
17
Why Unum benefits remain essential despite
changes to the health insurance industry
Disability


The law does not
include any
provisions for the
important financial
safety net of
disability income.
Critical illness

Disability coverage
will remain an
essential part of
an employer’s
benefits package.

Employees who
experience a critical
illness will still face
substantial health
care costs. The
legislation allows
for deductibles
up to:
• $2,000 a
year/individual
• $4,000 a
year/family
Accident

Health care reform
does not address
the high cost of
medical treatment
or equipment

Accident insurance
can offset some
of those out-ofpocket costs
Critical illness
insurance can help
offset those out-ofpocket costs
18
Learn more about market reform mandates
A white paper overview of the
market reform mandates and their
impact on employer, individuals
and the insurance industry
A quick reference
flyer on market
reform mandates
19
Paying the piper
According to the Congressional Budget Office, health care
reform will cost $940 billion over the next ten years.1

For the most part funding will come from:
Medical
insurers
Pharmaceutical
companies
Affluent
Americans
Medical device
manufacturers
1 Congressional Budget Office, letter to Congress, estimate of direct spending and revenue of health care reform, March 18, 2010.
21
The price of reform
Beginning in 2018, a 40% excise tax applies on
some health related coverage
These non medical benefits are excluded
from the tax:

Dental and vision coverage offered through
“stand-alone” plans

Voluntary benefits when premium is paid with
post-tax dollars

Any accident plan (paid with pre- or post-tax dollars)

Life and disability coverage

Long term care
22
What employers are saying
If health insurance providers pass some excise tax
burden to employers, than employers may pass costs to
employees.1
In fact, a Towers Watson survey shows that many employers
are already planning to do so.2
1 SHRM, “Tax on ‘Cadillac’ Health Plans Could Have a Major Impact,” By Bill Leonard, April 20, 2010. 2 Towers Watson, “Health Care Reform: Looming
fears mask unprecedented employer opportunities to mitigate costs, risks and reset total rewards, “ May 2010.
23
The impact on our nation
Mandate
Effective
Indoor tanning tax
2010
Health Spending Account/Archer
Medical Savings Account distributions
2010
Restrictions on Flexible Spending
Accounts (FSAs)
2011, 2013
Investment income tax
2013
Medicare tax increase
2013
Itemized medical deductions
2013
Individual mandates
2014
24
The impact on employers
Mandate
Effective
Small business tax credits
2010
Early retiree reinsurance program
2010
1099 requirement
2012
W-2 reporting
Delayed
to 2013
2012
Employer responsibility
2014
Financial penalties
2014
Large employer auto-enroll
2014
Excise tax or “Cadillac” tax
2018
25
The impact on benefits industry
Mandate
Effective
Pharmaceutical manufacturer levy
2010
Comparative effectiveness fee
2013
Medical device manufacturer levy
2013
Health insurer levy
2014
*Specific list of essential benefits is to be determined by Dept. of Health and Human Services
26
The “pay or play” factor
The financial viability of the reform package
as a whole is difficult to project, due to many
variables including:
Actual number of employers/
individuals who participate;
OR
Pay the penalty for not
participating in a plan
A survey by
Towers Watson
indicates the
vast majority of
employers are
likely to play.
1 From towerswatson.com, May 2010.
27
Business as usual for benefits other than medical
Ancillary benefits are excluded from these provisions,
according to these conditions:
28
Unum supplemental benefits remain essential
Accident and critical illness coverage—will continue
to grow in importance as an essential financial
safety net for employees.

Two provisions will make it harder for employees to
fund health care expenditures with tax-free dollars:
● Flexible Spending Account contributions limited
to $2,500
● No purchases of over-the-counter
medications without a prescription,
using these accounts:
− Flexible Spending
− Health Reimbursement
− Health Spending
29
Learn more
Ask your Unum representative for a copy of:
A white paper overview of
the tax, revenue and
enforcement provisions of
the law.
A quick reference
flyer of the
tax, revenue and
enforcement
provisions on
the law.
30
Health
Insurance
Exchanges
A marketplace for the future
The linchpin of reform
Health Insurance Exchanges are designed to provide:

Easy “comparison shopping” for coverage

More affordable coverage through rate oversight/subsidies

Clear communication of plan descriptions and rates

Choices in standardized benefit plans and levels of coverage

Better pricing/quality coverage through managed retail competition
While this is the intent of
the legislation, only time
will tell whether these
initiatives successfully
meet these objectives.
32
The ultimate test

The ultimate test of the effectiveness of
the health exchanges will come down to
two critical factors:
• Will they expand coverage
to millions of Americans?
• Will that coverage be
affordable?
33
The workings of an exchange
Many details yet to be established

Four major functions of the exchange:
● Certification
● Information
● Eligibility
● Implementation

Preliminary release in 2010
CBO estimate for 2019:

About 24 million people will purchase
coverage on their own through Exchanges

5 million will purchase insurance through
employers who use the Exchanges
34
Key dates of the Exchange
2010
Portals available for individuals and small businesses
to indentify affordable coverage
2011
First grants for states to establish exchanges
2013
Secretary of Health and Human Services to establish
an exchange in any state that hasn’t made significant
progress toward one of its own.
2014
Each state must have an exchange
• Only for employers with fewer than 100 employees
• Individual states may limit this to 50 employees
2016
Exchanges MUST permit employers with up to 100
employees to participate
2017
States may open up exchanges to large group market
35
Comparison shopping for coverage
Allow individuals and employees to select the
health plan that best fits their needs

Consumers can compare prices on four coverage levels

These levels will be based on actuarial value

Insurers will compete on
factors such as cost,
quality and network

Navigators will be available
to provide guidance

Brokers still play a
critical role as advisors to
employers and employees
36
An online shopping experience
To compare plans and comparison shop for
coverage, individuals or small businesses
will use an Internet portal.
Broker considerations
the law allows brokers
and agents to:

Guide employers as they
determine if they want to
offer coverage through an
exchange

Enroll individuals in any
qualified health plans

Assist individuals who apply
for premium tax credits and
cost-sharing reductions
Employer
considerations

Continue current offering
or move to exchange based coverage.

If exchange, then:
•
Employer will select
the level of coverage
•
Employer contributes
toward premium
37
An evolving concept
The idea of a health exchange is not new

In 1990, a handful of states implemented exchange
programs known as “alliances”

These plans failed due to a lack of regulation. This led to:
● Insurers from outside the alliances “cherry-picking” the
healthiest individuals from the alliance population
And resulted in:
● A high-risk, high-cost, medically
needy population
● An insufficient number of healthy
people paying into the plan
● Financial insolvency1
1 The New York Times, “A Texas-Sized Health Care Failure,” by Cappy McGarr, October 5, 2009.
38
Comparison of newer exchange plans
Massachusetts
Utah

Launched in 2006

Launched in 2009

Employer selects the
coverage tier; workers
may only purchase
coverage in that tier

Defined contribution

Must achieve 75%
enrollment to participate
in the exchange

Small businesses
(2-50 employees)

Large group pilot in
2011; all businesses
in 2012


Employer must pay at
least 50% toward
premium and establish
a base amount
Targeted individuals &
small businesses
(combined pool)

Fall 2010: individuals
can access coverage via
a link on the exchange
Federal

Launched in every state
by January 1, 2014

Employer selects the
coverage tier; employees
may purchase coverage in
this tier only†

States must offer
exchanges for individuals
and small businesses

States can choose to offer
separate exchanges for
individuals and small
groups - or both in one
exchange
†Employer responsibilities are discussed in detail in the Unum report “The price of reform: Funding America’s health care reform package.”
39
Oversight
HHS, in conjunction with the states, must establish rules so
exchanges will operate in the interest of consumers.
Justification
for premium
increases
Required
reporting
Disqualification
of health plans
Plans outside
exchange
must meet
same pricing
40
Guidance to watch for

Definition of Essential Benefits

Role of Brokers/Agents in enrollment

Determinations relating to open
enrollment periods

Secretary of Labor’s definition of “typical
coverage provided by an employer”

Health Care Choice Compacts
These changes will increase the need for
effective employee benefits communications.
41
Probability of the use of the Exchanges
A LIMRA survey of small employers:
Company expects to send
employees to Exchange
50
50
45
45
40
41
35
42 42
Percent likelihood
Percent likelihood
Company expects to purchase
medical through Exchange
39 39
38
30
25
20
15
17
10
8
5
0
5%
8
11
11
10 - 19
Company size
44
40
35
35
30
31
25
20
20 - 49
30
8%
26
21
26
15
14
10
5%
5
5
2-9
49
0
4
2-9
8
7
10 - 19
Company size
20 - 49
Health care reform has not altered the way that approximately
half or more of small employers plan to offer medical benefits.
1 LIMRA: 2010 Small Group Study, December 2010.
Not at all
Not very
Somewhat
Very
42
Exchange update

48 states in the District of
Columbia have applied for and
received exchange building grants
for up to one million dollars.

In 2011, HHS issued early
adopter grants to these states,
which have agreed to share
their technology models with
other states:
State or entity
Kansas
Maryland

Amount
$31.5 million
$6.2 million
New England Multi-State Consortia
$35.5 million
New York
$27.4 million
Oklahoma
$54.5 million
Oregon
Wisconsin
HHS to issue preliminary
information on exchanges
in Spring 2011.
$48 million
$37.7 million
43
Exchange update: challenges

February 7, 2011:

21 states with Republican
governors request changes to
existing mandates and flexibility
in implementation.
Requests:
February 24, 2011:
Kathleen Sebelius sends HHS
response that law allows for
some state flexibility.
Response:
To choose insurers
Allowed in current law. Precedent
exists in MA Exchange model
To waive essential and
preventive benefits mandates
Essential benefits a must, but law
allows for diversity in plan types
Waive provisions that
discriminate against CDHPs
Defended Exchange provisions
Medicaid flexibility
Law allows new approaches to the
traditional program
States to be reimbursed for
cost of PPACA implementation
Confirmed that PPACA calls for this
44
Learn more
Ask your Unum representative for a copy of:
A white paper overview of
the Health Insurance
Exchanges.
A quick reference
flyer of the
Health Insurance
Exchanges.
45
Clearing up misconceptions

While the CLASS Act
becomes effective January
2011, Enrollment will be
delayed until at least
January 2013

HHS has indicated that
changes are likely:
● To modify work requirement
● To increase premiums
● To offset concerns over
financial solvency1
Class Act
Key Dates
EFFECTIVE
January 2011
ELIGIBILITY
January 2012
ENROLLMENT
January 2013+
BENEFIT PLANS
October 2012
1 Forbes, “Sebelius: CLASS Act Is ‘Totally Unsustainable,’ Mandate Possible,” Feb. 23 2011.
47
CLASS Act key points

CLASS Act raises visibility for LTC

A basic level of guaranteed issue coverage

A modest safety net for low-wage workers
and working disabled

Five-year vesting period before benefits paid

No family coverage

Financial viability in question
● Concerns acknowledged by HHS1
1 Forbes, “Sebelius: CLASS Act Is ‘Totally Unsustainable,’ Mandate Possible,” Feb. 23 2011.
48
Timeline of the CLASS Act
Here is a snapshot of the time that must elapse before the first
covered individuals are vested in the long term care plan and
could qualify for benefits under the CLASS Act:
49
CLASS Act enrollment
Employees/individuals
can enroll directly
into CLASS Act
Can
auto-enroll
(with opt-out
option)
Worksite
enrollment
offered by
employer
Voluntary
basis
Not a mandatory offering like medical insurance
50
Enrollment clarification
Alternate
enrollment process
Employer auto-enroll


Employees may be
automatically enrolled
in the CLASS Act
program by their
employer the same
way employees can be
automatically enrolled
in retirement plans.
Employees can choose
to opt out.

For individuals:

(a) who are selfemployed

(b) have more than
one employer

(c) whose employer
does not elect to
participate in the
automatic enrollment
process established by
the Secretary
51
Premium payment
Most premiums
are paid through
payroll deduction
Alternative
options
for:
Employees who
want coverage
but employer
doesn’t offer plan
Self-employed
individuals
52
Basis for benefits
Benefits paid for:
Loss of 2 or 3 Activities
of Daily Living


Number of ADLs to
be determined by
the government
ADLs:
• Bathing
• Dressing
• Toileting
• Transferring
• Continence
• Eating
Cognitive
impairment

Can include:
• Traumatic brain injury
• Alzheimer’s disease
• Multiple sclerosis
53
The need for private coverage still strong
CLASS Act benefit may not be enough to fund:
 High
 All
cost of assisted living or nursing home care
of the cost for home health care
Cost of care1
Estimated
annual cost
of care:
$50 daily
CLASS benefit
would fund:
Home care2
$35,635
51% of cost
Assisted living facility
$41,485
44% of cost
Nursing home (semi-private)
$72,500
25% of cost
Nursing home (private facility)
$81,400
22% of cost
Type of care
1 Based on Unum internal research. “Unum long term care cost survey 2009,” Telephone survey of one-thousand nursing home facilities, assisted living
facilities and home care agencies located in the United States. June through August 2009.
2 Home care average is based on five hours of care per day, seven days per week.
54
Cost of CLASS Act coverage
Premiums not yet set
Estimates run from
the mid $100s
to mid $200s
per month
As low as $5
for full-time
students up to
age 22 and the
working poor
55
Advantages of the CLASS Act

Benefit payable for life if ADL
loss continues

Benefits adjusted for inflation

Guarantee issue

Opportunity for individuals to get
coverage who may not have been
able to afford private coverage
56
Comparison to private coverage
CLASS Act
Private LTC
5-year
vesting period
 No
vesting
 Most common private LTC elimination
period is 90 days
Benefit is fixed based on
ADL loss; not tailored to
meet specific needs
Can be customized to meet employees’
needs, including higher benefit amounts.
Financial viability
in question
Financial strength based on:
 Medical underwriting
 Limited guarantee issue
 Strict participation/enrollment requirements
Specified enrollment and
drop-out opportunities
Annual open enrollments; can terminate
at any time
No coverage for
family members
Coverage for family members
57
Learn more
Ask your Unum representative for a copy of:
A white paper overview
of the CLASS Act’s
provisions, limitations
and financial viability.
A quick reference
flyer on the CLASS
Act.
58
The CDHP strategy
The total savings from the first year of a consumerdriven health plan can be as high as 12% to 20%.1
CDHPs offer:

High deductible plans with lower premiums
● Premium on an HSA-based CDHP is 20% lower than
for a more traditional PPO2
● A shift in responsibility – making
employees more accountable for
their health care decisions

A way to keep health plan premiums
below the threshold of the 40%
“Cadillac” excise tax
1 American Academy of Actuaries, “Emerging Data on Consumer-Driven Health Plans,” prepared by the
American Academy of Actuaries Consumer-Driven Health Plans Work Group, May 2009.
2 Mercer, “In a tough year, employers hold the line on health benefit cost increases,” November 18, 2009.
3 Towers Watson, “Rethinking Employer Strategies in a Post-Health Reform World,” December 1, 2010.
60
CDHP components
CDHP components
CDHP*
Consumer-directed
health plan or
consumer-driven
health plan
A variety of strategies for reducing health care
costs by encouraging individuals to become
actively involved in their own health care
decisions. CDHPs can include any of the
elements below.
HDHP
High Deductible
Health Plan
A health insurance plan which does not provide
benefits until the employee has paid out-ofpocket for medical expenses to meet a high
deductible−typically at least $1,000.
HRA
Health
Reimbursement
Arrangement
An employer-funded account used to
reimburse employees for qualified medical
expenses.
HSA
Health Savings
Account
A tax-preferred account employees use to pay
for qualified medical expenses.
FSA
Flexible Spending
Account
A pre-tax account that is used to reimburse
employees for qualified medical expenses.
*These terms are used interchangeably. For the purposes of sharing research in this report, we will use the term cited by the research source.
61
Health Savings Accounts (HSAs)
The most common plan is an HDHP paired
with an HSA

This HSA must meet U.S. Treasury guidelines for “qualified”
plans, including a minimum deductible of at least:
● $1,200 per individual
● $2,400 per family
62
Health Reimbursement Arrangements (HRAs)
HRAs:

Can be owned and funded by the employer only

Typically provide “first dollar” coverage

Offer employers more control

If employee leaves a company, unused funds revert
to employer
63
Flexible Spending Accounts (FSAs)
FSAs are:

Sometimes called “flex plans”

Typically employee funded

Do not allow (or severely limit) rollovers
64
Other options
Dual-Option offering

Strategy used when multiple plan
choices are offered with different outof-pocket costs and payroll
contribution levels
Tiered Networks

Health providers are assigned ratings
according to performance regarding
quality of care and cost effectiveness
65
CDHPs and voluntary coverage
Voluntary benefits can offset concerns about CDHPs:

From employees, who perceive greater financial risk due to
higher deductibles and out-of-pocket costs

From employers, who want to mitigate employee risk without
adding cost to benefits budget
Common offerings with CDHPs:
Critical illness or
cancer insurance
for serious
illnesses
Accident
insurance for
injuries and
emergency care
Disability
insurance to
partially replace
lost wages
Life and long term care coverage can also help meet the needs for
coverage in today’s diverse workforce.
66
Learn more
Ask your Unum representative for a copy of:
A white paper overview of
the consumer-directed
health plans.
A quick reference
flyer on the CDHP
fund-based
accounts.
67
To learn more about

The reformation of the health
insurance industry

Or if you have questions about how
to plan consultatively for this new
era in employee benefits
Call your broker or local
Unum representative
68
© 2011 Unum Group. All rights reserved. Unum is a registered trademark and marketing brand of
Unum Group and it insuring subsidiaries.
Insurance products are underwritten by the subsidiaries of Unum Group.
MK-2589 (5-11)
FOR BROKERS AND EMPLOYERS
69